Advance Auto Parts Earnings Preview

Advance Auto Parts AAP is scheduled to report second-quarter 2011 results Wednesday, August 10, after the markets close. While first-quarter earnings were disappointing, the company has a high gross margin and has opened 37 new stores, which should help boost the top line. Analysts are looking for the auto parts retailer to report earnings of $1.38 per share, which compares to $1.16 in the same period of last year. That EPS estimate has slipped a penny per share from 60 days ago. Note that before the first-quarter miss of 3 cents per share, analysts underestimated Advance Auto Parts per-share earnings in the previous four quarters. The analysts' forecast also calls for the company to post revenues of $1.5 billion, an increase of 5.7% from a year ago. First-quarter revenue also fell short of consensus estimates, by 1.2%, but topped expectations in the previous four reporting periods. Looking ahead to the next quarter, analysts so far are looking for year-over-year growth of both per-share earnings and revenues. And the forecast for the full year calls for EPS up 22.1% year over year and revenue up 8.9%. The Company Roanoke, Va.-based Advance Auto Parts is a retailer of automotive aftermarket parts, accessories and maintenance items. Its more than 3,300 stores also offer battery and wiper installation, battery charging, electrical system testing, loaner tool programs, and oil and battery recycling services. The company was founded in 1929. During the three months that ended in June, the company refinanced a credit facility and announced a new president of its Autopart International division. It more recently launched a home-delivery service in its Ft. Myers, Florida, and its Houston markets. Performance The company has a long-term earnings per share growth forecast of 11.7% and a return of equity of 34.6%. Its forward P/E ratio estimate is less than the trailing P/E ratio of 12.2, and its PEG ratio is 1.0. The dividend yield is 0.5%. But only six of 21 analysts rate the stock a Buy or Strong Buy. The share price is nearly 6% lower than a year ago. In the past six months, the stock has outperformed competitor Pep Boys PBY but underperformed AutoZone AZO and O'Reilly Automotive ORLY. The stock has also underperformed the broader markets in that time. Action Items: Bullish: Traders interested in an exchange traded fund that includes Advance Auto Parts as a top holding might want to consider the following trade:

• SPDR S&P Retail ETF XRT: up nearly 8% since the beginning of the year

Bearish: Traders who might prefer exchange traded funds that include Advance Auto Parts competitors as top holdings may want to consider these positions:

• PowerShares DWA Technical Leaders PDP: up about 11% since the beginning of the year
• PowerShares Buyback Achievers PKW: up about 11% since the beginning of the year
• Rydex S&P Equal Weight Consumer Discretionary Index RCD: up more than 8% since the beginning of the year

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.